The FTC sued online dating service Match Group, Inc., the owner of Match.com, Tinder, OKCupid, and other dating sites, alleging that the company used fake love interest advertisements to trick hundreds of thousands of consumers into purchasing paid subscriptions on Match.com. Match.com allows users to create profiles free of charge, but users must upgrade to a paid subscription to respond to messages. According to the FTC, Match sent emails to nonsubscribers stating that someone had expressed an interest and encouraging them to subscribe to Match.com even when the contacts that generated Match’s emails came from accounts the company had already flagged as likely to be fraudulent. It allegedly used the substantial number of scammers on its site – a figure estimated to be as high as 25-30% of accounts – as a marketing opportunity to sell more subscriptions. The FTC also alleged that Match deceptively induced consumers to subscribe to Match.com by promising them a free six-month subscription if they did not “meet someone special,” without adequately disclosing that consumers must meet numerous requirements before the company would honor the guarantee. The complaint also includes charges that Match violated the Restore Online Shoppers’ Confidence Act by failing to provide simple mechanisms for consumers to stop recurring charges. It further alleges, that Match unfairly terminated consumer subscriptions when it prevailed in a billing dispute, in effect denying consumers access to service they had already paid for. The FTC will litigate these charges in a U.S. federal district court.
Online dating services, including Match.com, often are used to find and contact potential romance scam victims. Fraudsters create fake profiles, establish trusting relationships, and then trick consumers into giving or loaning them money. Just last year, romance scams ranked number one on the FTC’s list of total reported losses to fraud.
Multi-level marketer AdvoCare International, L.P. and its former chief executive officer agreed to pay $150 million and be banned from the multi-level marketing business to resolve FTC charges that the company operated an illegal pyramid scheme that deceived consumers into believing they could earn significant income as “distributors” of its health and wellness products. The FTC alleged that AdvoCare promoted a business opportunity distributing Spark energy drink and other products through a network of hundreds of thousands of participants, known in the company as distributors. The FTC alleged that the parties falsely claimed to offer a life-changing financial solution that would allow any ordinary person to earn unlimited income, attain financial freedom, and quit their regular job. In reality, the FTC alleged, the vast majority of AdvoCare distributors have earned no money or lost money. The settlement order requires the defendants to notify all AdvoCare distributors about the FTC’s lawsuit and settlement, opportunities to recoup financial losses, and to advise distributors that they will no longer be able to earn compensation based on purchases of distributors in their downline.
A federal court entered a temporary restraining order against Zurixx, LLC and affiliated companies, which allegedly used deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars. Zurixx’s advertisements routinely featured celebrity endorsers advertising free events that purportedly teach consumers how to make large profits by flipping houses “using other people’s money.” According to the complaint, the free event is in fact a sales presentation for three-day workshops that cost $1,997, which in turn are used to upsell consumers additional products and services that can cost as much as $41,297. Zurixx also allegedly required some consumers who received a refund to sign an agreement barring them from speaking with governmental consumer protection agencies, submitting complaints to the Better Business Bureau, or posting negative reviews. The order prohibits Zurixx from making unsupported marketing claims and from interfering with consumers’ ability to review Zurixx and its products.
Econsumer.gov Launches Social Media Campaign on Reporting International Scams
Econsumer.gov is launching a series of social media messages to raise awareness about reporting international scams to econsumer.gov, a joint effort to gather and share cross-border consumer complaints, with a web portal available to consumers in eight languages. First up are messages about online shopping and subscription traps. Help us spread the word, by tweeting and retweeting these recent econsumer.gov posts @FTC, @FTC, and @laFTC (in Spanish). Contact Hui Ling Goh for more information on how to participate, and to get a copy of the images.
A Belizean bank has agreed to pay $23 million, an amount approximately equal to all of its U.S.-based assets, to settle FTC charges that it assisted the Sanctuary Belize Enterprise in deceiving U.S. consumers as part of a scheme to sell property in a planned community in remote southern Belize.
In testimony before the U.S. Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, the FTC addressed how U.S. antitrust laws apply to acquisitions of nascent or potential competitors by digital platforms. Testifying for the FTC, Bureau of Competition Director Bruce Hoffman described the basics of antitrust analysis that the Commission can employ to prevent competitive harm in technology markets. The testimony also noted the Commission hearings on competition and consumer protection topics over the last year, including panels on the acquisition of potential or nascent competitors in the digital marketplace, and the formation of a Technology Task Force to address the potential challenges posed by digital industries.
Joint venture NEXUS Gas Transmission, LLC, and its member companies agreed to settle FTC charges that the joint venture’s $160 million acquisition of Generation Pipeline would likely harm competition to provide natural gas pipeline transportation in parts of three Ohio counties. According to the complaint, the acquisition is anticompetitive due to a non-compete clause that precludes North Coast Gas Transmission LLC from competing to provide such transportation in those three counties for three years after the acquisition closes. The proposed consent agreement preserves competition by requiring the parties to eliminate the non-compete clause.
Food distributor US Foods, Inc. agreed to divest three distribution centers to settle FTC charges that US Foods, Inc.’s proposed $1.8 billion acquisition of Services Group of America, Inc. would likely harm competition. The competitive concerns involved broadline foodservice distribution (the sale and distribution of a broad range of food and foodservice-related products to customers such as restaurants, hospital cafeterias, stadiums, and schools) in four local markets and to national and multi-regional customers in the United States.
The FTC announced it is seeking public comment on ways to improve its regulations for negative option marketing, a common form of marketing whereby the absence of affirmative consumer action constitutes consent to be charged for goods or services. Although such marketing is widely used, and can provide benefits to sellers and consumers, deceptive negative option practices – often called “subscription traps” – can saddle consumers with recurring payments for products and services they did not intend to purchase or did not want. The agency is considering whether to expand its current Rule to address persistent, harmful practices such as continuity plans, automatic renewals, and free-to-pay or nominal-fee-to-pay conversion offers. The comments will help the Commission determine whether there is reason to believe that those acts or practices are prevalent and analyze the costs and benefits of the rule as well as any regulatory alternatives. For more details, click the link above.
The FTC and the DOJ’s Antitrust Division released the agencies’ 41st Annual Hart-Scott-Rodino Report. 2,111 reportable transactions were notified to the agencies during fiscal year 2018, a 2.9 percent increase over the previous year. Of these, 39 resulted in a merger challenge. The Report also provides a 10-year summary of HSR transactions reported, second requests issued, and early terminations granted by the agencies, as well as a detailed statistical profile of transactions reported during fiscal year 2018.
The FTC has issued orders to six e-cigarette manufacturers seeking information to study the companies’ sales, advertising, and promotional methods. The FTC study will complement similar FTC studies on cigarettes and smokeless tobacco products. The orders will collect information about e-cigarette sales, advertising, and promotional practices in the U.S. for 2015-2018. The goal is to assist the Commission, policy makers, and the public to understand better the rapidly growing e-cigarette market.
FTC Testifies in the Senate and the House on the Agency’s Work to Protect Consumers and Promote Competition
In testimony before the U.S. Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, Chairman Simons detailed recent victories in stopping anticompetitive mergers and conduct, as well as significant policy initiatives, advocacy, and engagement with antitrust enforcement agencies abroad. He noted that in FY 2019, the Commission obtained significant relief in 20 merger matters. The FTC also successfully litigated a monopolization case involving sham litigation in federal court, and issued administrative decisions in two other major conduct cases involving online advertising and pharmaceuticals.
In testimony before the House Appropriations Subcommittee on Financial Services and General Government, Chairman Simons and Commissioner Chopra outlined the FTC’s work in areas ranging from privacy, data security, and consumer fraud, to mergers and acquisitions, to anticompetitive tactics by pharmaceutical and other companies. According to the testimony, through the third quarter of FY 2019, the FTC returned more than $459 million in redress to consumers, and FTC defendants paid more than $317 million through self-administered consumer refund programs required by FTC settlements. The testimony also noted that in FY 2019, the Commission negotiated a record-breaking $5 billion civil penalty against Facebook, and a $170 million penalty against Google and YouTube over alleged violations of children’s privacy law.
The FTC and the Consumer Financial Protection Bureau (CFPB) will host a public workshop on December 10 to discuss issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports. For more information, to submit a comment, or to request to participate as a presenter or panelist, click the link in the headline above.